Consolidation in the US Gaming Industry
May Not Benefit Smaller Casinos and Value-Driven Customers

/ Jason Ader

ATLANTIC CITY, NJ - May 5, 1999-- Atlantic City's biggest
casino operators are among those who'll benefit most from consolidation
in the US gaming industry, said Bear Stearns senior managing director Jason
N. Ader today at the 1999 Mid-Atlantic Gaming and Entertainment Congress
and Expo in Atlantic City. But operators' gain could come as much at the
expense of value-oriented Atlantic City casino customers as it does from
smaller casino operators, he added.

"Park Place Entertainment's purchase of Caesar's from Starwood last
week gives the company massive new scale in Atlantic City," Mr. Ader observed.
"With Caesar's, Park Place is neck-and-neck with the Trump Organization's
roughly $1.1 billion in annual gaming revenues -- or 29 percent -- of the
gaming market in the seaside town," Mr. Ader said, citing figures from
the just-published 1999 Bear Stearns Global Gaming Almanac.

And as incentives for offering promotions evaporates, Atlantic City's
"value-oriented" customers will find it tougher than ever to locate the
cash handouts and deals to which they have become accustomed over the years,
Mr. Ader said.

"For `value' customers, it's a different environment today. Those, particularly
from New York, who visit Atlantic City purely on the basis of generous
give-aways, could be lured elsewhere," he said.

One alternative is for Park Place and Trump to keep a hand in the discounting
and give-away game, Mr. Ader suggested, offering some room comps, meal
specials and other incentives that are competitive with the market -- but
not dilutive to earnings.

"Park Place's and Trump's sheer size also allows them to offer some
incentives not to gain market share, but to retain value-oriented customers
who could be lured to other gaming destinations," Mr. Ader said. But it's
a delicate balance, he added.

Mr. Ader estimates that in the city's new ownership make-up, the big
Atlantic City casino operators should aim to offer promotions of no more
than eight percent to 10 percent of revenues to retain value customers.
That's less than the 10 percent to 12 percent on average Atlantic City
has seen in recent years.

"It may be a less generous discount, but it's significant for Atlantic
City's average visitor, who is a 59 year-old working female with annual
income from $30,000 to $35,000 and a strong value orientation," Mr. Ader
said, citing the 1999 Bear Stearns Global Gaming Almanac.

For their part, smaller casino operators must find new ways to achieve
growth from existing market share. "For smaller players including Resorts
International, The Sands, Tropicana and The Claridge, aggressive give-aways
for customers can bring little gain and only damage financial results,"
Ader observed.

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